Britain shocked the world, including a majority of its people by voting out of the European Union. The world markets collapsed and the pound fell to over a three-decade low. Does this spell all doom for India? No. Read on...
On June 24, 2016, Britain voted to leave the European Union, the first country in the history of the mega trade coalition to do so. The 'brexit' camp rejoiced and the 'bremain' camp watched in horror, with thousands now demanding a second referendum to overturn their decision. But so far, it seems like Britain is on its way to invoking Article 50, and on its way out of the EU.
As the results rolled out on Friday, the global equity markets plunged. At home, the benchmark 30-share Sensex plunged 1,000 points and closed the week over 600 points below the red line, and the Nifty closed 2.20% lower. The rupee depreciated as the dollar strengthened against the pound. The pound fell to a 31-year low.
Here's a quick look at what Brexit may mean for India -- the good and the bad impact.
THE GOOD
Travel to the UK to get cheaper
One thing that has Indians cheering in unison is the fact that their travel plans to the UK just got cheaper. On the news of the final Brexit result, the British Pound slumped 8% to the Indian rupee in a single trading session, closing the day with 1 pound at 91.36 rupees. This means, less rupees can buy more pounds now.
In an earlier dna report, Travel Agents Association of India (TAAI), was quoted as saying, "The airline fares will be lower now. This may give a boost to the outbound travel from India to the UK."
On the flip-side, as the pound loses value, Britains may rein in their travel plans until there is more clarity and stability in the sterling. Britain is also expected to promote its tourism sector. Tourist visas may get cheaper and tour operators and hotels may announce attractive packages.
Cheaper to study in the UK
Brexit may have made life easier for hundreds of students who are looking to go to the UK to study. The pound is at 31-year low against the dollar and slumped 8% to the rupee which will help them save on school and tuition fees, living expenses, and more. Overseas education consultants are expected to cash in on the opportunity.
Jobs
A zeebiz report said that Indian immigrants will be better poised to get jobs in the UK. Citing a Care Ratings report, it said, Brexit can be a plus point for India as labour comes at a lower cost unlike that from the EU.
Earlier, the report says, businesses in the UK preferred locals first and then Europeans as it was a part of the EU. However, now, Indian workers, along with other Commonwealth countries like Pakistan, Bangladesh, are in line to get preference as it costs less to employ them.
Real Estate
This is a good time for Indian investors and businessmen to buy property in the UK. UK, especially London has been one of the favourite destinations for Indians (and the Chinese) to buy property. With Brexit, property prices are set to fall along with with the advantage of a stronger rupee against the pound. "It is very likely that many more Indians will seek to invest there, JLL India's country head and chairman Anuj Puri said.
THE BAD
Markets
Indian equity markets slumped 1000 points in a trading session, wiping out over Rs 4 lakh crore of investors' wealth in a day after UK's decision to leave the EU. Uncertainty in the short- and medium- term is likely to persist as Britain works out how its Brexit decision will pan out. Global equity markets are expected to remain volatile, the impact of which, will be seen in India.
Assocham has said that Brexit will result in strong ripples in the Indian markets, necessitating a contingency plan by the government and the Reserve Bank of India.
Indian companies
Indian companies based in the UK are ready to reevaluate their businesses in the country as Britain voted to break away from the EU.
This includes Tata Sons, Bharti Airtel, Motherson Sumi, Apollo Tyres, Tech Mahindra, pharmaceutical companies, and several others.
Tata Motors has given a statement saying that it will review the business of all its 19 firms that has presence in the UK. A statement from Tata Sons said that an access to markets and skilled workforce will be important considerations.
Tata Motors' Jaguar Land Rover in a separate statement said it was business as usual and they will manage the long-term impact and implications of the decision, insisting nothing will change overnight for it and the automotive industry.
"We remain absolutely committed to our customers in the EU. There will be a significant negotiating period and we look forward to understanding more about that as details emerge," JLR said.
Brexit will see Britain reevaluating and writing its own policies, which may have an impact on businesses as the way it does business may stand to change. If the British economy stands to slowdown because of the 'vote out' it will hamper the earnings of all these companies.
Brexit hit the London Stock Exchange and along with it, many Indian companies, listed on the LSE, saw its value shrinking after the vote to leave the EU. The effect will continue until markets stabilise.
There are concerns of Brexit having an impact on the IT sector in the long-term.
Trade
The India-UK bilateral trade is worth over $14 billion. After Brexit, new trade policies from the UK and its negotiation for new trade relations with the EU will have an impact on the trade it does with India and the rest of the world. A slowdown in the British economy as a result of Brexit will also hit India-UK trade.
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